340B drug discount program: Stop the abuse

Some major American healthcare providers are padding their bottom lines by exploiting a federal program meant to help low-income patients. This behavior is netting them billions in ill-gotten gains. And it could be preventing many vulnerable Americans from accessing the low-cost drugs they need to treat and prevent illness.

This abuse needs to be stopped.

In 1992, Congress created a program — known as “340B” — to help caregivers serving disproportionately large numbers of low-income beneficiaries and uninsured patients. Under 340B, drug manufacturers are required to sell their products at a discount to such institutions. The discounted prescriptions are dispensed either through the caregiver’s in-house pharmacy or through a contractual arrangement with an outside pharmacy.

340B has a noble cause. And many of the medications discounted through 340B do in fact go to clinics, hospitals, and medical facilities providing care almost exclusively to uninsured and poor patients.

However, some 340B participants are exploiting the program.

340B only requires caregivers to meet certain minimal thresholds for the number of medically underserved people they treat. For many hospitals, these eligibility standards are easily reached, and some are benefiting from the program’s deep drug discounts while still serving a relatively affluent clientele.

Moreover, participating caregivers are not actually required to pass drug savings along to their patients. The huge discounts they’re getting from pharmaceutical manufacturers don’t necessarily translate to lower pill prices for uninsured and low-income patients.

Given what we have recently learned about some hospital administrators inflating charges for a broad variety of basic services, there’s good reason to believe many sell those discounted drugs at full price to insured patients and then pocket the difference. Indeed, a report by the Raleigh News Observer last year found hospitals that “routinely mark up prices on cancer drugs two to 10 times or more over cost. In some cases, the mark up is far higher.”

Meanwhile, the vulnerable patient populations 340B was intended to help are often still stuck struggling to gain access to affordable pharmaceuticals.

In large part because some healthcare providers are abusing the 340B system, the size and cost of the program are ballooning out of control. The Berkeley Research Group estimates the total the total value of all the medicines sold through the program will more than double from $8 billion in 2010 to $19 in 2016.

Such a surge in expenses might very well be worth if it 340B was largely helping needy patients. But it is not clear that this is actually happening. Although 340B was created to help low-income patients obtain the medicines they need, it has turned into a revenue generator for many hospitals.

Caregivers are now allowed to qualify for the program’s deep drug discounts without passing along those savings to patients in need. Administrators are getting rich off a well-intentioned public program. Too many uninsured and poor patients still don’t have access to discounted drugs. 340B needs to be fixed.

Peter J. Pitts, a former FDA Associate Commissioner, is President of the Center for Medicine in the Public Interest.